Fund questions

DennisTenus

Hi,

I've been doing some research in the fund centre at IWeb and have a few questions. Some may be a bit stupid but I'm still learning and hopefully will help others in a similar position to me.

When a fund shows the performance for the previous year that is after OCF have been deducted I believe. So for example, if Fund A last years performance was 20% with an OCF of 1% and Fund B last years performance was 20.5% with an OCF of 0.5% then effectively £10K would have had the exactly same growth and have the same value now. Is this correct?

Legg Mason IF Japan Equity Fund Class X Accumulation (https://iwebfunds.webfg.com/index.php?section=sheet&idShareclass=F00000PLVU) shows a morningstar rating of 5 stars and low risk. However when I read the KID it's got a risk rating of 6 out of 7 meaning almost the highest risk! This doesn't make sense. Which is right? Why are they conflicting?

I want to adopt some low risk funds into my portfolio, especially as low risk funds seem to grow more than most savings accounts and whilst I know this doesn't mean NO risk whatsoever the risk is reduced significantly I assume/hope. So therefore I was looking at Vanguard LifeStrategy 40% Equity Fund A Acc (https://iwebfunds.webfg.com/index.php?section=sheet&idShareclass=F00000MLUM) which the morningstar risk shows low risk. However the KID shows 4 out of 7 risk right in the middle!?? Compare that to Vanguard LifeStrategy 100% Equity Fund A Acc (https://iwebfunds.webfg.com/index.php?section=sheet&idShareclass=F00000MLUS) and the KID shows 5 out of 7, only 1 step up when the difference in equity is massive! I don't understand this. In fact the Vanguard 80% Fund shows the same as the 40% Fund at 4 out of 7! Is this simply because the scale is not wide enough being only out of 7 on the KID? And if so, they should come up with a better scale on the document (yes I know it's a standard scale by the looks of it).

I noticed some funds have a tiny OCF compared to others. For example some of the HSBC and Fidelity ones are between 0.06% - 0.08%! That's crazy when some funds are over 1%. Plus some still have as good performance. I assume a fund manager can charge what they like and if people invest in it it's up to them? Do fund managers ever change the OCF up or down?

Why does everyone rave about Fundsmith so much when there is about 20 funds on IWeb alone that have better performance? I know, it's not guaranteed. Plus a number of them have lower OCF too.

I suppose I can answer my own question here that things just cost different amounts. I worked out that the same amount and same number of funds would cost over 10 times more with HL than IWeb! Crazy really. HL may be better but it's not over 10 times better.

Sorry this got a bit long, too many questions!

Thanks

dunstonh

Legg Mason IF Japan Equity Fund Class X Accumulation (https://iwebfunds.webfg.com/index.php?section=sheet&idShareclass=F00000PLVU) shows a morningstar rating of 5 stars and low risk. However when I read the KID it's got a risk rating of 6 out of 7 meaning almost the highest risk! This doesn't make sense. Which is right? Why are they conflicting?

That fund is one of the most volatile Japanese funds going.

Not all data suppliers are good. Not all snapshots at a given time are accurate.

However the KID shows 4 out of 7 risk right in the middle!??

The KIID works to a different scale. No-one uses that scale professionally. It is best you dont to.

I noticed some funds have a tiny OCF compared to others. For example some of the HSBC and Fidelity ones are between 0.06% - 0.08%! That's crazy when some funds are over 1%.

Passive vs active. Its not crazy as the costs reflect the human element.

Do fund managers ever change the OCF up or down?

yes

Why does everyone rave about Fundsmith so much when there is about 20 funds on IWeb alone that have better performance?

How is their performance better? Over what periods, what sectors and what risk levels?

I worked out that the same amount and same number of funds would cost over 10 times

more with HL than IWeb!

That cannot be correct. Do you want to explian your workings?

The fund charges would be the same unless there is a superclean share class available on one and not the other. Platform charges differ but not that much.

DennisTenus

dunstonh wrote: »

That fund is one of the most volatile Japanese funds going.

Not all data suppliers are good. Not all snapshots at a given time are accurate.

The KIID works to a different scale. No-one uses that scale professionally. It is best you dont to.

Do you mean they don't use the KIID scale or don't use the morning star scale?

dunstonh wrote: »

Passive vs active. Its not crazy as the costs reflect the human element.

How can I tell which a fund is?

dunstonh wrote: »

yes

Is it just updated on provider sites or announced somewhere?

dunstonh wrote: »

How is their performance better? Over what periods, what sectors and what risk levels?

I worked out that the same amount and same number of funds would cost over 10 times

That cannot be correct. Do you want to explian your workings?

Sorry I meant to say over 5 years. I did...

£45K in HL 9 funds at 0.45% = £1012.50 total for 5 years
£45K in IWeb 9 funds at £25 open fee + 9 x £5 = £70 total for 5 years

Is that right?

dunstonh wrote: »

The fund charges would be the same unless there is a superclean share class available on one and not the other. Platform charges differ but not that much.

Do you mean in relation to my first question about the OCF and performance figure? So am I correct in that example?

Thanks

Prism

DennisTenus wrote: »

Hi,

Why does everyone rave about Fundsmith so much when there is about 20 funds on IWeb alone that have better performance? I know, it's not guaranteed. Plus a number of them have lower OCF too.

Thanks

I'm not sure everyone does, but what you will probably find is that most if not all of those 20 funds have more risk. Five of them invest in one sector (tech) and a number of the others in smaller companies which tend to do worse during a crash. Fundsmith is known for investing in large boring stable companies which also have a pretty high growth rate.

firestone

As you are using Morningstar you could google their articles if you have not already - "is an annualised return the same as average" and also "whats behind the Morningstar ratings" if you want to see how they get some of their results.
Also not sure if others recommend it but if you look at Citywire charts they will show funds ranked by total return,standard deviation & max drawdown against other funds

Linton

DennisTenus wrote: »

Do you mean they don't use the KIID scale or don't use the morning star scale?

Or possibly dont use either - there isnt a standard scale.

How can I tell which a fund is?

It's name is a good starter - if you see the word Index it is (perhaps almost) certain that it's a passive fund.

Is it just updated on provider sites or announced somewhere?

Fund prices are published by the fund manager each day (or possibly less frequently) and distributed widely by the platforms, by web sites like Trustnet, the press etc etc. Updating the data doesnt happen instantaneously.

Sorry I meant to say over 5 years. I did...

£45K in HL 9 funds at 0.45% = £1012.50 total for 5 years
£45K in IWeb 9 funds at £25 open fee + 9 x £5 = £70 total for 5 years

Is that right?

Your figures of platform charges could be correct, assuming you didnt buy or sell anything beyond the initial purchase during the 5 years. H-L's charges may seem a lot of money. However each day your £45000 could easily rise or fall by their annual charge and on average you could reasonably expect to make more than 10 times that amount.

Do you mean in relation to my first question about the OCF and performance figure? So am I correct in that example?

The OCF is included in the fund performance results. If a fund publishes a 1 year performance of 20.5% then that is exactly what you would have received had you invested in it a year ago. You do not have to look at OCF when comparing the performance of two funds.

Glen_Clark

I'm a bit wary of open ended retail funds so don't hold any.
The platform I use (x-o) don't do them anyway, I don't know why.
But I have this vision, rightly or wrongly, that if fund managers wanted to park some iffy stock, or just hide some overpriced fees, they could best hide it in retail funds, where less sophisticated investors are less likely to see it.
Would be harder for them to hide junk in ETFs and Investment Trusts held and scrutinised by large professional investors?

firestone

while hidden fees have been mentioned before don't think funds will be any less scrutinised then Investment trusts and not sure they would want to hold iffy stock.If you mean poor performing stock you would have the same risk & possibly more as the passive would hold it as part of the index its following but the active may have dropped it.
But just in case i'm off to check my funds!

EdSwippet

Linton wrote: »

H-L's charges may seem a lot of money. However each day your £45000 could easily rise or fall by their annual charge and on average you could reasonably expect to make more than 10 times that amount.

But this is no reason to just accept H-L's funds platform charge where it can be avoided. The ups and downs of the market are indeterminate, but H-L's annual 0.45% is both certain and recurring.

For what it's worth, the H-L charge would probably come out even larger than the OP's estimate, since the estimate is a straight-line 0.45% of £45k multiplied by five. In practice you would expect the funds to grow over the years, so compounding would increase the total H-L charge further. In contrast, iWeb charges are static as assets rise.

Compared to iWeb, H-L's charges really are a lot of money...

DennisTenus

EdSwippet wrote: »

Compared to iWeb, H-L's charges really are a lot of money...

Exactly what I was meaning!

DennisTenus

Glen_Clark wrote: »

I'm a bit wary of open ended retail funds so don't hold any.
The platform I use (x-o) don't do them anyway, I don't know why.
But I have this vision, rightly or wrongly, that if fund managers wanted to park some iffy stock, or just hide some overpriced fees, they could best hide it in retail funds, where less sophisticated investors are less likely to see it.
Would be harder for them to hide junk in ETFs and Investment Trusts held and scrutinised by large professional investors?

Sorry not sure what you mean by "open ended retail funds"?


What platform do you use?

firestone wrote: »

while hidden fees have been mentioned before don't think funds will be any less scrutinised then Investment trusts and not sure they would want to hold iffy stock.If you mean poor performing stock you would have the same risk & possibly more as the passive would hold it as part of the index its following but the active may have dropped it.
But just in case i'm off to check my funds!

How would you check them??


I'm still a bit confused when it comes to OCF... let me ask it a different way... if last years performance of Fund A was 20% and OCF 0% (I know this doesn't exist but just for this question) I would have seen growth of 20% correct?




So the difference between an passive vs active fund is that an active fund is managed and they regularly keep an eye on stocks and maybe buy/sell etc whereas a passive fund they just buy it and forget?



As for the low risk part of my portfolio, please could some people suggest some lower risk funds I could take a look at?


Cheers all